In May these lightly regulated investment funds, which jointly manage roughly $1.2 trillion, lost 1.16 percent, data from Chicago-based Hedge Fund Research show.

The losses, however, were not nearly as large as some people had speculated late last month when managers and industry analysts said many hedge funds had seen declines of 3 percent to 6 percent in the first weeks of May.

The majority of strategies tracked by HFR posted losses in May and among the strategies that did eke out gains most of the increases were very modest.

Losses were particularly heavy at hedge funds that specialize in emerging markets and technology, HFR data show.

Hedge funds, which promise to make money in all markets by using techniques such as selling stocks short that are generally off limits at mutual funds, did outperform the broader stock market last month. The Standard & Poor's 500 index lost 3.09 percent in May.

In the first four months of the year, hedge funds posted gains. They scored a 2.01 percent rise in April, a 1.85 percent gain in March, a 0.35 percent increase in February and a 3.65 percent jump in January.

Despite the decline in May, the average hedge fund is still up 6.72 percent during the first five months of the year, handily outperforming the broader stock market that shows a gain of 1.75 percent.

As expected, the industry's losses were concentrated mainly in the emerging markets areas where experts said some funds suffered high double digit losses after fears of interest rate increases rippled through most markets a few weeks ago.

HFR said funds specializing in eastern European securities lost 5.98 percent after gaining 6.47 percent in April.

Technology funds lost 5.10 percent last month.

Not surprisingly, funds that specialize in selling securities short fare well when stocks fell, gaining 3.65 percent, HFR data show.

Meanwhile, data from the Barclay Group, which invests in hedge funds and tracks their performance, show so-called CTAs which invest mainly in commodities posted only small losses of about 0.35 percent. Again this is far less than what some investors had feared during May.

Investment